Nfld. & Labrador

Energy expert pans Crosbie's Muskrat Falls 'ridiculous' rate mitigation plan

The Opposition leader thinks he has a way to keep electricity rates down once the hydroelectric project comes online, but it's come under fire.

'There is no magic bullet,' says Tom Adams

One thing is clear: electricity rates in the province will go up unless some sort of mitigation action is taken. (Terry Roberts/CBC)

PC Leader Ches Crosbie's plan to keep Newfoundland and Labrador electricity rates from skyrocketing once Muskrat Falls comes online is coming under fire, with one energy expert calling aspects of the plan "ridiculous" and "fanciful."

"What I'm seeing is just a long list of double-counting, wishful thinking. This is just not a practical solution," said Tom Adams, an energy consultant and researcher, and a self-described critic of the hydroelectric project since 2012.

"There is no magic bullet for this."

The Opposition leader released the Crosbie Hydro Energy Action Plan, or CHEAP, on March 11. It takes a multifaceted financial approach to come up with $575.4 million a year, the figure the party says is required in order to keep power rates in the province at the 14.67 cents per kilowatt hour mark.

Currently, ratepayers are billed at around 12 cents per kilowatt-hour, a price that looks to hit 23 cents when the $12.7-billion over-budget and behind-schedule Muskrat Falls project comes online, predicted to start later this year. An interim report in February from the Public Utilities Board said the province needs to find $744 million a year to keep rates at current levels.

It's a grim situation, and after Adams combed through Crosbie's mitigation plan, he told CBC Radio's On the Go, "I wish it was true."

Ches Crosbie stands by his party's plan, and calls for Adams to better explain the rationale for his critiques. (Sherry Vivian/CBC)

A numbers game

One of the central ways CHEAP banks on finding that $575.4 million is by finetuning Nalcor's operations, its returns, dividends, and redirecting its oil and gas revenue.

While the PUB report also recommends re-examining Nalcor, Adams said combing through the energy corporation to find cash has already been done. 

"These are savings that are already very well-baked into the official plan about how Muskrat's going to operate, and what its rate impacts are going to be," he said.

But Crosbie refuted that, saying the PC Party has "been very careful and very diligent in looking to verify the information that we based CHEAP on," and challenging Adams to specify what information he's basing his critiques on.

CHEAP does list the publicly available reports it couches its math in, but the document also lapses at times into vague language to describe its savings methodology, such as challenging "Nalcor to be more aggressive in driving efficiencies."

The Muskrat Falls power station is set to come online before the end of 2019. (Nalcor)

Selling power — but to whom?

Crosbie is also betting the province will be able to sell $41 million of Muskrat Falls power in 2021 to customers outside Newfoundland and Labrador, admitting that while such power will be expensive, and profits effectively nil, "That doesn't mean you don't sell it. You got to go out there and realize what you can in the marketplace."

But Adams questions whether marketplace even exists.

"It's ridiculous for Newfoundland to think there's some great untapped market in export sales that's really going to solve your problems," he said, noting the idea of Atlantic Canada selling green power to New England has persisted for decades without much in the way of tangible sales, and even Hydro-Québec revenues south of the border have slumped recently.

It's ridiculous for Newfoundland to think there's some great untapped market in export sales that's really going to solve your problems.- Tom Adams

"Prices in New England have tanked. Demand is flat," he said.

"The notion of the lucrative New England power market is a theme that reoccurs over and over again, and has been used to justify all kinds of fanciful plans."

The PUB report does mention New England as a potential market, alongside New York and the Maritimes.

To threaten Quebec … or not

Adams also dismissed Crosbie's idea to strong-arm Hydro-Québec to the bargaining table.

CHEAP claims that as of August 31, 2016, a tax exemption for Hydro-Québec expired on its agreement involving the Upper Churchill Falls hydroelectric plant. That exemption should be used as leverage with Quebec, said Crosbie, to negotiate talks and a potential cashflow to Newfoundland and Labrador.

"The notion that there's an untapped opportunity in the contract that hasn't been exploited, I just don't buy it," said Adams.

Crosbie said the Liberals had little to say on the matter when he brought it up in the House of Assembly, and said that's evidence of ignorance within government of the expiry.

But the Department of Natural Resources, in a statement to CBC, said it has received legal advice about the exemption. "However, we cannot publicly disclose the advice we received, as it could erode our position."

The statement further chided the PC leader: "As a lawyer, Ches Crosbie should know better."

Lawyer Crosbie's response: "I have my own legal opinion, and  this is workable. [The tax exemption plan] is feasible."

Read more from CBC Newfoundland and Labrador

With files from On The Go


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